The good times are back in Europe – at least for now – making growth the word on every managing partner’s lips. According to the International Monetary Fund, last year’s European recovery was an ‘engine of global trade and economic growth’. Across the EU27, annual GDP grew between 1.5% and 5% – the biggest figures being recorded among the smallest member states that experienced a severe post-crisis downturn, including Ireland and some CEE countries.
The corollary? Bullish stock markets and buoyant initial public offerings with Mergermarket data showing that European M&A hit a post-crisis high of $929.3bn across 7,235 deals in 2017 – Europe’s resurgence has unleashed a wealth of corporate dealmaking ambition.
This, our third annual Euro Elite report – which identifies 100 leading firms in around 40 European jurisdictions, using a methodology that blends size, reach and quality across key product lines – shows independent law firms have certainly harnessed the benign conditions. However, continued pressure from international players in the largest EU economies keeps on driving many leading independents to seek growth elsewhere. ‘It’s very competitive. There’s an oversupply of lawyers, law firms and legal services,’ says Alexander Ritvay, managing partner of Noerr, Germany’s largest independent. Noerr’s total revenues for 2017 increased by 8% to €222.6m. But as its German revenues grew by 7% to €203.4m, in CEE they swelled 12% to €19.2m.
Revenues were equally robust at Hengeler Mueller. ‘Compared to the key London players, we are fairly small,’ says Christof Jäckle, corporate partner at the firm. ‘We want to stay small and focused on transactions.’ Topping an impressive 2017 deal list, Hengeler advised The Linde Group in its $45.5bn merger with Praxair – the largest European deal completed last year across all sectors. Gleiss Lutz also continues to be busy, advising Volkswagen and Audi on the emissions scandal and cartel investigations. ‘After two record years in a row, we are already ahead of last year,’ says partner Christian Arnold.
‘There’s an oversupply of lawyers, law firms and legal services.’
Alexander Ritvay, Noerr
While Jäckle acknowledges Freshfields Bruckhaus Deringer as its key domestic competitor, every top German independent anticipates some future squeeze from Latham & Watkins and Kirkland & Ellis as the ambitious duo take further strides into the local market, strategically hiring M&A partners from them as well as from local Magic Circle offices. There is a competitive environment, agrees Alexander Schwarz, co-managing partner of Gleiss, especially as the battle for talent is also coming from ‘outside the traditional legal field’ – notably from start-ups (see ‘Market overview: Germany’).
The regional picture
‘Italy is back,’ proclaims Rosario Zaccà, managing partner of Gianni, Origoni, Grippo, Cappelli & Partners (GOP), which saw revenues up by 6% to €132m last year (see ‘And yet it moves’, page 100). With few big Italian M&A deals, GOP has directed more effort in dispute resolution: boosted by procedural and legal changes, it has flourished. However, Stefano Simontacchi, co-managing partner at BonelliErede, can point to a 12% revenue increase in 2017 fuelled by his firm’s African expansion. ‘We have selected countries with a potential for growth and without too many international firms already there,’ he says. ‘In Egypt and Ethiopia, we were among the first movers. Our strategy is to become the leading international law firm in the Mediterranean Basin and North Africa. In Dubai, we are the only firm looking specifically for cross-border work with Africa.’
An equivalent picture emerges in Spain (see ‘Market overview: Iberia’) but directed towards a different continent. At Garrigues, Europe’s largest independent, 2017 revenues moved ahead by nearly 2%. ‘Our international expansion has been one of the key factors,’ says executive chair Fernando Vives Ruiz, adding that ‘billings from Latin America have risen more than 26%’. When Garrigues announced 11 promotions to equity partner last November, notably five of them were outside Spain.
More concerned until recently about increasing European market share through its network partners – Chiomenti in Italy, Gide Loyrette Nouel in France and Gleiss in Germany – Cuatrecasas managing partner, Francisco Martínez Maroto, now shares the Vives vision: ‘Latin American markets are the natural area of expansion for us.’
Luis de Carlos, managing partner at Uría Menéndez, also echoes the theme. ‘2017 was a very good year,’ he says. ‘Revenue was up 6% – the fifth consecutive year of growth. All our offices and practices are doing well.’ A key factor has been Uría’s 30% stake in Philippi Prietocarrizosa Ferrero DU & Uría (PPU): joint offices in Chile, Colombia and Peru have delivered double-digit annual growth and ‘PPU accounts for around 10% of revenue’, he says.
‘There is a choice: clients have known this for a long time. Some prefer internationals, some prefer independents.’
Didier Martin, Bredin Prat
Meanwhile, João Vieira de Almeida, managing partner of VdA, comments: ‘We are the first Portuguese firm to go over €50m in annual revenues; we would have never done this without the internationalisation that took place in the last three years.’ VdA has developed a spread of offices across Lusophone Africa and beyond. ‘Our growth rate is quite remarkable: increasing turnover by a double-digit percentage three years in a row,’ adds PLMJ managing partner, Luís Miguel Pais Antunes, who has followed a similar path.
Despite rich pickings for some firms in Africa and Latin America, most independents still focus exclusively on their domestic markets when serving national and international clients.
Although Gide has a longstanding presence in several Francophone markets, they have not been engines of growth to the same degree. Among its 14 offices in 13 countries, France still drives most of Gide’s revenue. Real growth last year was notably the French firm’s best since the crisis.
Among Dutch firms, De Brauw Blackstone Westbroek also had a good year, with litigation and M&A performing strongly, according to corporate partner, Harm-Jan de Kluiver. Although there is continued pressure from international firms ‘the established Dutch law firms are holding their own’, he says, pointing to ‘more interest from companies wanting to set up in Amsterdam due to Brexit’. At Stibbe, managing partner Derk Lemstra says: ‘There is always a steady stream of M&A work, and we have seen a significant increase in cross-border litigation and strong growth in regulatory work.’
Cross-border M&A has been very active, as have litigation, regulatory and competition, according to Didier Martin, managing partner of Bredin Prat, an exclusively French transactional firm. ‘There is a choice: clients have known this for a long time,’ he says. ‘Some prefer internationals, some prefer independents.’ He points to several international firms reducing their French footprint. ‘Some are too large for their share of the market,’ he notes. ‘France has been late in reforming. There’s real confidence in the behaviour of the government, but the behaviour of lawyers is not always related to confidence: lawyers are often called in at moments of crisis.’
Scandinavian firms comprise a quarter of The Euro Elite Top 100. ‘It has become more competitive for several years – primarily domestic competition. We don’t have the international firms present, but they do pitch for high-end matters,’ says Arne Møllin Ottosen, managing partner at Denmark’s Kromann Reumert. ‘We’ve seen significant pick-up in the M&A market, also capital markets and joint ventures. In the last five years, we have set record after record.’
But at Roschier, managing partner Fredrik Rydin says: ‘It is highly competitive at the top end of the market. In Sweden, we have seen active pressure from leading international firms, especially in M&A.’ Litigation, he adds, has been flat out, with transactional work also very active.
‘We are the first Portuguese firm to go over €50m in revenues; we would have never done this without internationalisation.’
João Vieira de Almeida, VdA
Daniel Hochstrasser, senior partner of Bär & Karrer in Switzerland, confirms that his firm also had ‘an excellent year, busy across the board: lots of investigations, arbitrations and deal activity in the media, financial and tech sectors’. Homburger managing partner Daniel Daeniker adds: ‘M&A transaction activity has been at a high, which you only see at the top of a cycle. We haven’t seen this kind of boom since 2007. The big question everybody asks: is this an end-of-cycle frenzy or just sustained economic growth fuelled by low interest rates?’
In Dublin, the Irish independents have certainly been frenetic. ‘It is very busy – really flat out,’ says Brian O’Gorman, managing partner at Arthur Cox. ‘Tech, pharma and real estate have been particularly strong.’ Michael Jackson, managing partner of Matheson says: ‘We had record growth in 2017 and in the first half of 2018; we’ve had a very strong start across all sectors.’ Telling the same story, A&L Goodbody’s managing partner Julian Yarr adds: ‘Last year, we increased headcount by 6-7%; as this year kicked off, we increased it by another 7%.’ Sectors he identifies include energy, ‘notably renewables; we’ve seen a lot of private equity investment’.
For independents across the CEE region, the turnaround is also in full swing. ‘The Czech Republic, Hungary, Romania, Bulgaria, Serbia… are all in a very strong recovery mode,’ says Erik Steger, managing partner at Wolf Theiss. ‘The notable exception is Poland because it never had a shrinking economy.’ With several international firms having retrenched or pulled out, there has been some dividend for those with a long-term commitment to the region. ‘‘We are committed to stay in the region; there are more referrals from international firms coming to us after some of them left the CEE, which strengthens our position,’ says Michael Lagler, managing partner at Schoenherr.
‘We’re on a growth path,’ says Wolf Theiss’s Steger. ‘We’ll get stronger offices and more people – 5% to 10% over the next two years.’ Kinstellar’s senior partner Jason Mogg agrees: ‘Our revenue in 2017 was only up 6%; I would expect it to be more like 10-15% this year.’ He also expects an uptick in fee rates ‘because of business levels’ pointing to an increase in M&A, strong activity in the healthcare and automotive sectors, and increased private equity investment. Schoenherr’s Lagler says that he has no plans to increase lawyer headcount. He sees the strongest competition from Wolf Theiss and CMS, which is also regionally structured across CEE from Vienna.
Full steam ahead for Europe’s top independent firms – at least for now. LB
The Euro Elite average lawyers/partners per region
The Euro Elite average number of offices per region
The Euro Elite totals
The Euro elite top 25 totals
The Euro Elite top 25 averages